Foreign Inward Remittance Certificate (FIRC): Full Form, Meaning and RBI guidelines
As an Indian exporter, navigating the complexities of international transactions and compliance can feel like solving a complex puzzle. Today, we'll explore a crucial piece of that puzzle: FIRC
FIRC or its full form Foreign Inward Remittance Certificate, is a document issued by banks as proof of receiving international payments. Over the years, regulations around FIRC have changed significantly, creating confusion and mystery around this important document. Let's clear the air and decode the what, who, and why of FIRC.
As we've covered, the full form of FIRC is a Foreign Inward Remittance Certificate and it serves as a proof of foreign transfers. Until 2016, AD Category I Banks were authorised to issue FIRCs to exporters for receiving international payments. This document was essential for exporters to obtain after each cross-border payment. It served not only as proof of payment receipt but also as a crucial document for claiming export-related incentives, such as tax exemptions on foreign currency payments received in India.
Changing RBI Guidelines: From FIRC to FIRA
- In 2016, the RBI introduced the Export Data Processing Management System (EDPMS) to digitally record all export-related data.
- With the introduction of EDPMS, the Reserve Bank of Indiaissued guidelines for banks to stop issuing FIRCs for payments received against export of goods. Banks now issue FIRAs (Foreign Inward Remittance Advice) instead of FIRCs for export collections.
FIRA is also interchangeably called FIRS (Foreign Inward Remittance Statement) or NOCs (Non-Objection Certification) by banks. FIRA/FIRS/NOC serve the same purpose. As we have seen, along with proof of receiving international payment, it is also essential for claiming export-related benefits and GST refunds. - As per RBI regulations, FIRCs are now issued only for specific financial transactions like receiving inward remittances from FDI and FII. Both FDI and FII indicate investment in foreign countries or projects. The key difference is that FDI involves long-term investments in physical assets, while FII represents short-term investments in financial markets. So, you would need a FIRC from banks if you are receiving returns from foreign investments.
FIRA is often still referred to by its old name, FIRC. While both documents serve the same purpose, FIRC is technically only issued for returns on Foreign Direct Investment (FDI )or Foreign Institutional Investment (FII). For all other export collections, FIRA is what you need.
Who needs a FIRC/FIRA?
Anyone receiving foreign payments needs a FIRC certificate or FIRA. Beyond goods and service exporters engaging in international trade, many individuals and entities may receive international payments without realising it.
Overall, the following typically require a FIRA:
- Indian exporters receiving international payments.
- Companies in India providing services to overseas companies and receiving payment in foreign currency.
- Salaried individuals working remotely as contractors for international companies, and receiving compensation in foreign currency.
- Freelancers serving international clients and receiving compensation in foreign currency.
- Freelancers service international clients via marketplaces such as Upwork and TopTal.
Why do Exporters Need FIRA?
Beyond compliance, here’s why FIRA is crucial for exporters:
- Goods or services exported are classified as zero-rated supplies, exempt from GST. However, to claim a GST refund for input tax credit, exporters must furnish their FIRA.
- Exporters require FIRA to claim export-related incentives, including exemptions on foreign currency payments received in India.
Understanding the content of FIRC/FIRA
This is a sample FIRA/FIRC document. All crucial remittance details have been masked for security purposes. Now let’s break the content of a FIRA down:
- Name and details of the sender/remitter bank i.e. your client’s bank
- Name and address of the sender, i.e., your client’s details
- Name of the person/org receiving the payment i.e your details
- Transaction number
- The Foreign exchange rate applied to your transaction
- Amount paid in foreign currency
- The amount received in INR/ Indian rupees
- Purpose code of the remittance (e.g., P0802 if your business is a Software Consulting service)
How do I get my FIRC/FIRA from the bank?
Receiving your export payment directly through your bank can make obtaining a FIRC/FIRA a lengthy process. You need to submit a request to the bank, and the bank typically takes 7-15 days to provide the FIRA. You may also need to follow up multiple times, and banks often charge at least INR 400 to issue the FIRA, depending on the institution.
Enter yours truly!
Get your FIRA from Skydo Instantly
Getting a FIRA might sound like a hassle, but with Skydo, it's a breeze. Our fully automated payment system along with built-in partnerships with banks, ensures effortless compliance with RBI guidelines, without needing any manual intervention.
When you receive an export payment through Skydo, we automatically generate the required FIRA for you at no extra cost. Just log into our user-friendly dashboard, and you'll find your FIRA ready to download, complete with all the details you need.
What is an eFIRC?
In conversations around FIRA, there are a few more terms that get frequently mentioned, one of them being eFIRC. So what exactly is eFIRC?
- Firstly, it's important to clarify that eFIRC isn't a document or certificate; rather, it's a unique number, issued on EPDMS.
- The eFIRC is typically relevant for exporters of goods or software, where a shipping bill or Softex is recorded on the EDPMS at the time of shipment of the goods or software delivery.
- The exporters of such goods or software must submit their export details and documents to update their EDPMS records and receive the e-BRC (bank realisation certificate). For other types of exporters, this process is not necessary.
- In this situation, an eFIRC is typically needed when an export payment/ foreign exchange transaction is received by a bank different from the exporter’s main bank (the one where the exporter submits their documents).
Imagine you export pottery overseas and have accounts with two banks in India - Bank A (your main bank) and Bank B (secondary bank). You use your main bank, Bank A to handle your export paperwork. However, you receive the foreign remittance/export payment in your secondary account in Bank B. Bank A has proof you exported something, but no record of the money coming back in. An eFIRC is like a messenger in this situation. Bank B, which received your money, will issue an eFIRC for Bank A to close the Shipping Bill (for goods) or SOFTEX (for other transactions) on EDPMS. Bank A can view the eFIRC number on the EDPMS platform and close the EDPMS record.
- eFIRC essentially connects the dots between the paperwork and the money, even if they go through different banks to ensure regulatory compliance.
Understanding the difference between electronic Bank Realisation Certificate (eBRC) and FIRC
- Exporters, particularly those dealing in physical goods, are quite familiar with the electronic Bank Realisation Certificate (eBRC). This essential document is proof that you, an exporter, have received foreign funds from the overseas buyer/client for the goods or services sold abroad.
- While the Foreign Inward Remittance Advice (FIRA) validates and confirms export payments, the BRC serves as the second step by confirming that the payment received corresponds to the goods exported.
- Once exporters obtain their FIRC/FIRA, they can submit it to the bank. The bank then verifies the payment details, matches them with the exported goods, and upon successful validation, issues the BRC.
- e-BRC is often needed in case of goods and software exports where the Shipping bill or SOFTEX is registered on EDPMS i.e the government export portal, and for claiming benefits offered by the Indian government under the Foreign Trade Policy (FTP).
Generally speaking, e-BRC applies mostly to goods and software exporters (under STPI). If you are one of them, you can use this simple decision tree to understand which documents you will need:
GST and FIRC/FIRA: Everything you need to know
Exporting goods and services is considered Zero-Rated Supply, meaning it is subject to 0% GST. However, to claim a GST refund for the input tax credit, exporters must provide the required documents including FIRC or FIRA. These documents authenticate that the business is claiming a refund because it exported services and couldn't offset its input tax credit as it would in normal domestic business. Without FIRA, claiming a GST refund may not be possible
Claiming GST refund with FIRA; Things to take note of:
- To claim your GST refund, the payment received must be in foreign currency. This will be authenticated with the help of FIRA/FIRC.
- Along with your FIRA/FIRC, you'll also need the export invoice and a copy of the shipping bill (in case of goods) filed with customs authorities
- You must submit your GST refund application on the GST portal along with all supporting documents, including FIRA/FIRC. The information in your application must match the details in the FIRA/FIRC.
- Once the claim has been filed, authorities will verify the FIRC/FIRA and supporting documents. Authorities may also seek further clarification if required.
- If the application is in order, the refund will be processed and credited to the bank account linked to the GST registration.
Conclusion
As we surge in cross-border transactions, ensuring compliance and safeguarding against illicit activities has become a pressing concern. However, at Skydo, we believe your focus should be on advancing your business, not on grappling with compliance challenges.
With Skydo, enjoy seamless international payments, delivered promptly and without any hidden fees. But that's just the beginning! Every time you receive a cross-border payment, an auto-generated FIRA is readily available for you to download, relieving you of compliance burdens so you can devote your energy to what truly matters: driving your business forward.
What is FIRC?
FIRC or Foreign Inward Remittance Certificate, is a document issued by banks as proof of receiving international payments. Until 2016, AD Category I Banks were authorised to issue FIRCs to exporters for receiving international payments. With the introduction of EDPMS, RBI issued guidelines for banks to stop issuing FIRCs for export collections. Banks now issue FIRAs (Foreign Inward Remittance Advice) instead of FIRCs for export collections.
What does FIRC stand for?
How to get FIRC from bank?
What is FIRC and BRC
